Playing around with my biggest investment

The first house I owned came with a mortgage interest rate of 13 percent. It was the early 1980s, and although the price tag on the brand new 1,272-square-foot home was $68,000, that interest rate was representative of the times. My husband and I were first-time homeowners and together, we earned barely more than $50,000 a year.

We didn’t qualify for a VA loan because my Vietnam-era spouse wasn’t a veteran, so we went with an FHA loan. It’s possible we could have refinanced the loan at some point and reduced that interest rate, which, fortunately for us, was a fixed-rate, not an ARM with a balloon payment. But we were novices, and we didn’t dare play around with the biggest investment we’d ever made. “Playing around” was the way a lot of us viewed the more well-off who we thought could afford to gamble their money on property or stocks. Refinancing the biggest loan we’d ever taken out was a scary proposition because, frankly, we were ignorant about its benefits.

Years later, after spending the early 2000s as this publication’s real estate reporter and learning about financial instruments and programs, the thought of refinancing my mortgage wasn’t anywhere near as scary. In fact, it seemed like a rather pragmatic thing to do while interest rates remained historically low.

The 1,641-square-foot home I bought in 1999 cost more than twice that first home. I started out with a 30-year fixed-rate FHA mortgage at 8 percent. In 2003, when interest rates started to drop, I refinanced and secured a 6.25 percent, conventional fixed rate loan. My mortgage payment dropped almost $200 a month, happily leaving me with a lot more discretionary income.

By the time I decided to refinance again, interest rates had declined another point or two. Early in 2008, after I’d owned the house for nine years, I elected to try to qualify for a 15-year fixed-rate mortgage loan and ended up with a 5 percent rate. Going for the 15-year loan also sliced 10 years off my loan payments because I would be able to pay off the loan sooner. I felt a little giddy about it, in spite of the fact that my monthly house payment rose to accommodate the shorter payoff period. My income had risen each year to that point, so a slightly higher mortgage payment wasn’t a stretch.

I assumed 2008 probably would be the last time I’d refinance my mortgage, because I couldn’t imagine a better interest rate or a much shorter payoff period. At a staff meeting, I mentioned my latest refinance and the benefits. Some colleagues told me they’d never given refinancing a thought, but would look into it because it sounded like a positive move. One colleague admitted surprise at what a good move it would be for him, and he quickly jumped into the process.

My three home loans on my current house were accomplished at two different banks, one of which is no longer in existence, Charter Bank. At the time, it was the largest residential mortgage lender in the state and I kept my loan with Charter until its takeover by the FDIC in 2010 because it’d been the bank that had made me a homeowner once again and I felt some loyalty to it.

In late 2010, when my former Charter mortgage loan officer called to tell me he’d moved to Bank of Albuquerque, along with my mortgage, I asked about refinance rates. After learning I could lower my interest rate by at least another full percentage point and my monthly house payment as well, I decided to go for it. The only negative was that the appraisal came in $11,000 lower than the one in 2008. Welcome to the Great Recession.

Last year, I rejoined a local credit union. When I discovered it was offering car loan interest rates of 1.95 percent, I moved my 8 percent Ford-financed car loan to the credit union a week after I bought the car (it was purchased over the Labor Day weekend, so the credit union wasn’t open when I drove my new wheels off the lot). Once I’d accomplished a couple of home loan refis, a car loan refinance was worth it to get the best bang for my bucks — the whole reason for refinancing my properties.

Although there are a few sparkles of light starting to appear in the darkness of the past four years’ poor economy, interest rates remain historically low, but most likely not for too long. The Federal Reserve has been getting heat from Congress and others not to extend the nation’s lowest prime rates in history for much longer, even though the Fed has said it might hold them down into 2013.

Aware of that, I decided to check the credit union to see what sort of rate I could win if I chose to refinance my mortgage one more time. It appeared I could gain another 1 to 2 percent drop, so I have elected to go through the refinance process one last time. Ultimately, I will have shaved about 12 years worth of payments off my original 30-year fixed mortgage and reduced the interest rate on the loan by more than 50 percent. Closing costs were rolled into all of my refinances, and I usually ended up with a little bit of cash at the end of the process. I’m not a pro, but in my case, it’s been well worth it to be a player.

What’s your experience been like in the refinance process? Did you come out a winner? Please comment below.